New York Watchdog Group Goes After Commercial Property Tax Break

A property tax break that was renewed in Albany this spring and enjoys the support of New York City’s mayor is facing criticism from a fiscal watchdog.

State lawmakers passed a four-year extension of the Industrial & Commercial Abatement Program before the legislative session ended in June, New York Focus reported. But that was a year before it was due to expire, and not enough time to assess whether the incentive actually works as intended, according to a new letter from the Citizens Budget Commission.

The tax break cost the city $506.3 million during fiscal year 2024, per the CBC’s analysis, which said the program has an “overly broad design” and lasts "twice as long as necessary.”

“Since ICAP’s creation in 2008, economists and policy analysts have warned that it may be ineffective and could cost the City millions of dollars in unnecessary tax breaks if not reformed,” Andrew Rein, president of the CBC, said in the letter.

The extension was proposed by New York City Mayor Eric Adams and has the backing of the Real Estate Board of New York.

“REBNY joined the City of New York in supporting the renewal of ICAP to encourage investment in commercial buildings, which is critical to ensuring that New York continues to attract high-paying employers and the daytime foot traffic that is essential for vibrant commercial business districts,” a REBNY spokesperson told Bisnow in a statement.

The extension was granted because its expiration date had been March 2025, before the state legislature would be able to take action to tackle it, The City reported. Sources told The City that the tax break provides important economic activity.

NYC’s Independent Budget Office said in a July report that Albany lawmakers justified their decision to renew the tax break in part because the subsidy could allow for power plants that provide energy when demand is high. No such plants, known as “peaker plants,” currently receive the tax break.

ICAP has been around in some form since the 1980s, when businesses were leaving NYC, per The City.

The program offers a 25-year tax break to commercial properties located below 59th Street or above 96th Street that undergo renovations. It is also offered to any new construction projects north of 96th Street. There are additional geographic guidelines for projects in the city’s other boroughs.

ICAP’s main beneficiaries are office properties, commercial condos and retail buildings, which received $174.5M, $109.5M and $64M, respectively, in tax breaks during the most recent fiscal year.

But the tax break may not be cost-effective, the CBC said. The organization had been preparing an analysis for the initial expiration date next year.

Evidence points to inefficiency in the program, the CBC’s letter says, citing the New York City Council’s 2016 evaluation of the program, which found only 3.6% of projects receiving the tax break actually required it to be financially feasible. 

“The rushed, under-the-radar ICAP extension continues the State’s poor practice of preserving economic development tax incentive programs without proof they work,” Rein said in the letter.